Secondary Agriculture ii Secondary AgricuIture: Value Addition to Primary Agriculture _________________________________________________________________________________ -bridging the gap between the rural and urban economies of India- By: Prof. Desh PaI S. Verma The Ohio State University, CoIumbus, OH, USA verma.1@osu.edu Technical Advisory Committee on Secondary Agriculture (TACSA) Report Submitted to the Planning Commission, Government of ndia (October 15, 2008) Secondary Agriculture iii Secondary AgricuIture .. Adds vaIue Creates jobs Reduces poIIution Uses agro resources Improves farm economy BuiIds ruraI agro industries Increases internationaI trade Adds quaIity to the Iife of ruraI India Makes agricuIture internationaIIy competitive The world needs agro-based products... ----India can deIiver! Secondary Agriculture iv LIST OF CONTENTS List of TabIes vii List of Figures vii Abbreviations ix TechnicaI Advisory Committee on Secondary AgricuIture (TACSA) xii Preface xiv AcknowIedgments xvii 1. EXECUTIVE SUMMARY 1 2. RECOMMENDATIONS 6 3. INTRODUCTION 10 3.1 Agriculture as the Foundation of ndian Economy 11 3.2 Current State of Agriculture in ndia 12 3.2a The "Apparent Success in Agriculture 13 3.2b Real Rural Economic Progress in ndia: 15 3.3 Agriculture Expenditures and the Economy of the Country 17 3.4 Value addition to Primary Agriculture 18 3.5 Primary vs Secondary Agriculture 19 3.6 Present Agro-based ndustries in ndia 20 3.6a Food and Feed-Related Agriculture ndustries 21 3.6b Non-Food Agri Products ndustries 21 4. SECONDARY AGRICULTURE 23 4.1 Constraints 23 4.1a Rural nfrastructure and Building Agro-industries 24 4.1b Comparative Picture with China 27 4.2 Agriculture Education and R&D 27 4.2a nformation Technology and Remote Agriculture Education 29 4.2b Role of CAR and CSR nstitutes 29 4.2c Other nstitutional and Technological Constraints 30 4.3 Marketing of Agroproducts 31 4.4 Regulatory Environment 31 4.5 Potential of Secondary Agriculture in ndia 32 4.6 Financing Agro-Based ndustries 34 5. GLOBAL AGRICULTURE TRANSFORMATION 37 5.1 Bioconversion: Challenges and Opportunities 37 5.2 The Bio-Economy of Europe 40 5.2a Food, Feed, Fiber, and Fuel (4F) Sector in Europe 40 5.2b Biochemicals, Biomaterials and Fuels (USA) 42 5.3 Global Agro-ndustries Forum 42 5.4 Potential and Problems of GM Crops 43 Secondary Agriculture v6. BUILDING SECONDARY AGRICULTURE INDUSTRIES IN INDIA: 45 OPERATION MISSIONMODE 45 6.1 Operational Considerations for Building Secondary Agriculture ndustries 46 6.2 Secondary Agriculture nnovation Fund (SAF) 48 6.3 ntegrated BioProcessing Technology nstitute (BT) 49 6.4 Other Organizational Considerations 50 6.5 Federated Farmers Farms (3F) 50 6.5a Success Factors for the New Generation Cooperatives 51 6.5b Federation of Farmers Association 51 6.5c Successful ndian Cooperatives 53 6.6 Agri-Export Zones (AEZs) in ndia 54 6.7 Mega Food Parks 55 6.7a Supply Chain Management 57 6.7b Basic Facilities to be Provided in the Food Parks 57 6.7c A Review of the Food Park Scheme 60 6.7d Eligibility Criteria and Financial Assistance 60 6.8 Total Economic mpact Calculations for Value Addition 62 7. FOOD AND FEED GRAINS AND THEIR BYPRODUCTS 62 7.1 Soybean 62 7.1a Food and Non-food products from Soybean 64 7.1b Training and Entrepreneurship Development 65 7.2 Other Grain Products and Byproducts 69 7.2a Wheat Byproducts 71 7.2b Rice and Rice Products 72 7.2c Corn (Maize) and Corn Byproducts 73 7.2d Cereal Bran & Pulse Husks and their Byproducts 77 7.2e Vegetable Oils and their Byproducts 78 7.3 Example of the Scale of Grain-Based Products ndustries 80 7.4 Example of Canada's Grain-Based Products ndustry 81 7.5 Potential of Secondary Agriculture Products from Grains in ndia 82 8. HORTICULTURE AND FOOD PROCESSING INDUSTRIES 85 8.1 Food Processing ndustries in ndia 85 8.2 Overview of the Fruits and Vegetables Sector in ndia 88 8.2a Fruit and Vegetable Processing 90 8.2b Lack of Suitable Varieties and Processing Technology 92 8.2c Rural Level Food Processing 93 8.3 High-Value Secondary Food Products 96 8.4 Byproducts from Fruits and Vegetables 97 8.4a Wines and other Products from Grapes 97 8.4b Natural Food Colors and Dyes 98 8.5 Bioactive Molecules from Biomass 100 9. MEDICINAL AND AROMATIC PLANTS INDUSTRIES 103 9.1 Cultivation and Processing of Medicinal Plants 103 9.2 Global Standard Set for Wild Medicinal Plant Harvesting 107 9.3 Building nternational Quality Medicinal Plants ndustry in ndia 110 9.4. Value Addition to Medicinal Plants and New Products Development 111 9.4a Pure Herbs and Herbal Extracts 111 9.4b R&D-Based Phytoceuticals and Novel Medicinal Compounds 112 9.4c Functional Foods 112 9.5 Aromatic Plants ndustries in ndia 115 9.6 Major Rate-Limiting ssues for Medicinal Plants Export 116 10. ANIMAL PRODUCTS AND BYPRODUCTS 119 10.1 The Growth of Meat Export ndustry 119 10.2 Strength, Weakness, Opportunity and Threat (SWOT) Analysis of the Export 120 Slaughter Meat ndustry 10.3 Existing Legislation that Constraint the Slaughter House/Meat ndustry 121 Secondary Agriculture vi10.4 Financial Assistance Schemes (FAS) for the meat export industry 123 10.5 Poultry and Fish Feed 124 10.6 Other Animal Byproducts 126 11. ALTERNATE CROPS (BIORESOURCE) AND TECHNOLOGIES 128 11.1 Enzymes and Chemicals 128 11.2 Marine Products 133 11.3 Other Bioresources 135 11.4 Biorefinaries 135 11.4a Paulownia 136 11.4b Jatropha 139 11.4c Sweet Sorghum 140 12. MARKETING OF AGRO-BASED PRODUCTS 142 12.1 National 142 12.1a Traditional Marketing 142 12.1b National Agricultural Cooperative Marketing Federation of ndia 143 12.1c Cooperative Marketing 144 12.1d The Public Food Distribution System 144 12.1e Market ntervention and Price Support Systems 145 12.2 nternational Marketing 146 13. SECONDARY AGRICULTURE WEB-INTERFACE 148 13.1 Primary Agriculture Commodities Database 148 13.2 Secondary Agriculture Database 149 13.2a The Web Portal (www.secondaryagriculture.org) 151 13.2b Administrative nterface 151 13.3 Further mprovements Needed for Objective Judgments in Agriculture 151 14. CONCLUSIONS 152 15. REFERENCES 154 16. ANNEXTURES 157 . TACSA Visits and Meetings 157 . nputs Sought 163 a. Direct nput Solicited From nstitutions 163 b. Farmers nterface on Secondary Agriculture at Sardar Vallabh Bhai Patel University of Agricultural & Technology, Meerut 171 c. Jatropha Workshop, AR, Delhi 180 . Other Contacts 182 V. Secondary Agriculture Related mportant Publications 194 V. Medicinal Plants available at NRCMAP 197 V. Projects Supported by National Medicinal Plants Board for Propagation 202 and Cultivation of Medicinal Herbs Secondary Agriculture vii LIST OF TABLES Table 1: Gross Domestic Product at factor cost by ndustry 17 Table 2: Outlay and expenditures in the three Departments of the Ministry of Agriculture 18 for Fnancial Years i.e. 2005-to 2008 Table 3: Potential of ndia to Develop New Secondary Agriculture ndustries Making 33 The Following Specific Products for National and nternational Markets Table 4: Dimension of Agro-Based ndustries in Europe 40 Table 5: EU BioEnergy Projects 41 Table 6: EU Projects on Non-Food Products 41 Table 7: Present ndian soybean processing industry 64 Table 8: Soy products, Processing Equipment and Technology Developed at SPU, CAE, 65 Bhopal for Food Uses of Soybean Table 9: Major ndustrial Products from Corn 77 Table 10: Example of Some Value-added Products from vegetable oil industry 78 Table 11: Type of Fruits grown in Different Agro Climatic Zones in ndia 89 Table 12: Area under Production of Major Fruit Crops 89 Table 13: Area and Production of Major Vegetable Crops 90 Table 14: ndia's Share in Agricultural and Horticultural Produce in the World 91 Table 15: Key Barriers to Exports of Fruit and Vegetable 94 Table 16: Some Natural Colors Used in Food ndustry 99 Table 17: Potential Anthocyanin Sources 100 Table 18: CFTR Licensees of Plant growth Promoter: Containing n-triacontanol 101 Table 19: Specific ndustrial Enzymes and Their Uses 130 Table 20: Agriculture Commodities Categorized Under Different Categories 148 Secondary Agriculture viii LIST OF FIGURES Figure 1: Example of value addition to marine bio-resource as a multiple in thousands 20 Figure 2: A Roadside Farmer's Market in Orissa 25 Figure 3: Proposed Structure of SAF Organization 46 Figure 4: Supply chain link from Farm to Food Parks/ Retailers 56 Figure 5: Examples of Secondary Agriculture Products from Soybean 68 Figure 6: Examples of Corn-based Food and Non-food Secondary Agriculture Products 75 Figure 7: A Coconut Seller has Siesta While Selling Fresh Coconuts 87 Figure 8: Growth in Export of Processed Fruit and Vegetable Products (2001-2006) 91 . Figure 9: Fruit Productivity- Comparison Among Brazil, China and ndia 92 Figure 10: Productivity of Vegetables in ndia Compared to China and the World 93 Figure 11: Propagation of Paulownia from Cuttings Using Drip-rrigation System to 138 Conserve Water Figure 12: Paulownia Plantation 138 Figure 13: High-Value Paulownia wood 139 Secondary Agriculture ix ABBREVIATIONS A ACAS Additional Central Assistance Scheme ADM Archer Daniels Midland AERC Agro Economic Research Centers AEZs Agri-Export Zones AMLEA All ndia Meat & Livestock Exporters Association AR All ndia Radio APEDA Agriculture and Processed Foods Export Development Authority APMC Act Agriculture Produce Marketing Committees Act APSRAC A.P. State Remote Sensing Applications Centre B BCP Bicalphos BM Blood Meal BPL Below Poverty Line BSE Bolster Safeguards against Bovine Spongiform Encephalopathy BTU British Thermal Unit C CACP Commission for Agricultural Costs and Prices CC Cotton Corporation of ndia CDFD Center for DNA Fingerprinting and Diagnostics CET Central Excise Tax CFTR Central Food Technological Research nstitute CAE Central nstitute of Agricultural Engineering CMAP Central nstitute of Medicinal and Aromatic Plants CS Commonwealth of ndependent States CMA Centre for Management in Agriculture COSA Central Office of Secondary Agriculture CSR Council for Scientific and ndustrial Research CSRO Commonwealth Scientific and ndustrial Research Organization CSO Central Statistical Organization D DAC Department of Agriculture and Cooperation DAHDF Department of Animal Husbandry Dairying and Fisheries DARE Department of Agricultural Research and Education DBT Department of Biotechnology DCP Dicalcium phosphate DEPB Duty Entitlement Pass Book DGFT Director General of Foreign Trade DOE Department of Energy DPR Detailed Project Report E EOU Export Oriented Units ESCOP Experiment Station committee on Organization and Policy F 3F Federated Farmers Farm FAO Food and Agriculture Organization FAS Financial Assistance Scheme FC Food Corporation of ndia FDA Food and Drug Administration FD Foreign Direct nvestment FFA Federation of Farmers Association FFSF Full Fat Soy Flour FCC Federation of ndian Chambers of Commerce and ndustry FM Fish Meal FRLHT Foundation for Revitalization of Local Health Traditions G GAF Global Agro-ndustries Forum GDP Gross Domestic Product GM Genetically Modified Secondary Agriculture xGMP Good Manufacturing Practice GPS Global Positioning System H HACCP Hazard Analysis and Critical Control Point HFCS High Fructose Corn Syrup HFM Hydrolyzed Feather Meal I ASR ndian Agricultural Statistics Research nstitute BT ntegrated Bioprocessing Technology nstitute CAR ndian Council of Agriculture research CRSAT nternational Crops Research nstitute for the Semi-Arid Tropics CTs nformation and Communication Technologies EA nternational Energy Agency FFCO ndian Farmers Fertilizer Co-operative Ltd. FFDC ndian Farm Forestry Development Co-operative Ltd. HBT nstitute of Himachal Biodiversity Technology MPGC ndian Medicinal Plant Growers Consortium MPGC nternational Medicinal Plants Grower Consortium NESA nternational and National Experts in Secondary Agriculture SRO ndian Space Research Organization SSC-MAP nternational Standard for Sustainable Wild Collection of Medicinal and Aromatic Plants TG FFCO-TOKO General insurance UCN nternational Union for Conservation of Nature K KBBE Knowledge-Based Bio-Economy KHET Knowledge Hub for Entrepreneurship and Technology nformation KVK Krishi Vigyan Kendra L LFD Local Final Demand LMCs Local Management and Protection Committees M MAP Medicinal and Aromatic Plants MAPCO Medicinal and Aromatic Plants Certification Office MBM Meat Bone Meal MFP Ministry of Food Processing ndustry MS Market ntervention Scheme MM Meat Meal MMPs Multi-purpose Medicinal Plants MOFP Ministry of Food Processing ndustries MPCAs Medicinal Plant Conservation Areas MPCC Medicinal Plants Conservation Centre MSP Minimum Support Price N NABARD National Bank for Agriculture and Rural Development NAFED National Agriculture Cooperative Marketing Federation NARS National Agriculture Research System NASULGC National Association of State Universities and Land-Grant Colleges NCCT National Council for Cooperative Training NCDC National Cooperative Development Corporation NCL National Chemical Laboratory NCU National Cooperative Union of ndia NAM National nstitute of Ayurvedic Medicine NPOP National Program of Organic Products NRCMAP National Research Centre for Medicinal and Aromatic Plants NRCS National Research Centre for Sorghum NRCS National Research Centre for Soybean NR Non Resident ndian NYDC New York State Department of Environmental Conservation O OECD Organization for Economic Co-operation and Development OFPPC On-Farm Primary-Processing Centers P PFFCS Primary Farm Forestry Co-operative Societies PLDCS Primary Livelihood Development Cooperative Societies PM Poultry Meal PMA Project Management Agencies PSS Price Support Scheme R R&D Research and Development RDF Rural nfrastructure Development Fund Secondary Agriculture xiRSC Rural nfrastructure & Services Commons RKVY Rashtrya Krishi Vikas Yojana ROSA Regional Offices of Secondary Agriculture RSVY Rashtriya Sam Vikas Yojana S SA Secondary Agriculture mprovement SAF Secondary Agriculture nnovation Fund Ltd. SCFE Super Critical Fluid Extraction SEZs Special Economic Zones SFFCS State Farm Forestry Co-operative Societies SHGs Self-help Groups SON Standard nput Output Norms SPS Sanitary and Phytosanitary Standards SPUC Soybean Processing and Utilization Centre SPV Special Purpose Vehicle T TACSA Technical Advisory Committee for Secondary Agriculture TBGR Tropical Botanical Garden and Research nstitute TFAC Technology nformation, Forecasting and Assessment Council TRAFFC Wildlife Trade Monitoring Network TSP Textured Soybean Protein U UNDP United Nations Development Program UNDO United Nations ndustrial Development Organization USAD United States Agency for nternational Development USDA United States Department of Agriculture USPTO United States Patent and Trademark Office V VAT Value Added Tax VKGUY Vishesh Krishi Gram Udhyog Yojna W WWF World Wildlife Fund Secondary Agriculture xii TECHNICAL ADVISORY COMMITTEE FOR SECONDARY AGRICULTURE (TACSA) Prof. D.P.S. VermaFRSC (Chairman TACSA) Department of Molecular Genetics & Plant Biotechnology The Ohio State University 1060, Carmack Road, Columbus OH 43210 USA Ph: 1-614-29-23625, E-mail: verma.1@osu.edu Dr. Ganesh Kishore Managing Director Burrill and Co San Francisco, USA E-Mail: gkishore@b-c.com Dr. Suri Sehgal Sehgal Family Foundation, Des Moines, A, USA & nstitute of Rural Research and Development Plot 34, Sector 44, nstitutional Area Gurgaon-122002, Haryana Ph: 0124-4744114 Fax# : 0124-4744123 E-mail: Suri.Sehgal@smsfoundation.org, Suri76@aol.com Dr. Satya Panigrahi Agriculture Materials and BioProcessing Engineering University of Saskatchewan Engineering Bld. , 57 Campus Drive Saskatoon, SK, S7N5A9, Canada Ph: 1-306-966-5312, s E-Mail: sap382@mail.usask.ca Prof. V.L. Chopra Member, Planning Commission Yojana Bhavan, Sansad Marg, New Delhi- 110001 Ph: 011-23096586(O); Fax: 011-23096708 E-mail: vl.chopra@nic.in Dr. V. Prakash Director Central Food Technological Research nstitute Mysore-570 013, Maharashtra Ph: 0821-2517760; Fax: 0821-2516308 E-mail: director@cftri.com Dr. Mukesh Gupta (Co-opted Member) M.R. Morarka GDC Rural Research Foundation Vatika Road, Off Tonk Road Jaipur-303905 Ph: 0141-2771100; Fax: 0141 2770031 E-mail: info@morarkango.com Mr. A. K. Krishna Kumar (Co-opted Member) Chief Operating Officer (Head- Agri and Rural Business) L&FS CD Ltd. Niryaat Bhawan, Rao Tula Ram Marg New Delhi 110057 E-mail: Krishnakumar.AK@ilfsindia.com Ms. Sandeepa Kanitkar (Co-opted Member) Managing Director Kanitkar Research & Education Foundation 'Ravee Deep', Ganeshwadi, Off. F.C. Road K. R Kanitkar Path, Pune-411004, Maharashtra Fax: 020-25676670, E-mail: sankan@vsnl.com Dr. S.D. Sharma Director ndian Agricultural Statistics Research nstitute Library Avenue, Pusa, New Delhi-110012 Ph: 011-25844179(O) Fax: 011-25841564, E-mail: diector@iasri.res.in Dr. Sukhpal Singh Associate Professor Centre for Management in Agriculture (CMA) ndian nstitute of Management Ahmedabad-380015, Gujarat Ph: 079-26325015 ; Fax: 079-26306896 Secondary Agriculture xiiiE-mail: sukhpal@iimahd.ernet.in Dr. Sunil Khairnar (Co-opted Member) ndian Agribusiness Systems Pvt. Ltd. C-74, First Floor, Okhla ndustrial Area, Phase 1 New Delhi - 110 020 Ph: 011-26371601-08, E-mail : sunil@agriwatch.com Dr. Vijay Sardana Director ARPL Agribusiness Knowledge Services 145-A, Pocket-C, Mayur Vihar Phase-2 New Delhi-110091 E-mail1: arplindia@gmail.com Dr. V.V. Sadamate Adviser Agriculture Planning Commission Yojana Bhavan, Sansad Marg, New Delhi- 110001 Ph: 011-23327703(O) E-mail: sadamate1@yahoo.com Coordinator Dr. Vandana Dwivedi Jt. Advisor Planning Commission, Yojana Bhavan, Sansad Marg, New Delhi- 110001, E-Mail: dwivediv@nic.in Secondary Agriculture xiv PREFACE ndia is going through a economic and social transformation. n this process the country has to transit from an agriculture-based economy to a products-and-services-based economy, and eventually move towards a knowledge-based economy. This path, however, is difficult to travel and requires a road map, whichmust be based on the acknowledgment of the fact that agriculture is the foundation of ndian economy. Since 65-70% population depends on this resource and they live in rural areas where there are not even basic necessities available, rural infrastructure improvement is the first challenge that the nation must face by providing power and connectivity to each village. Building industries based on the agriculture bioresource can only be done in a clustered manner so that such industries can be supported by input of raw materials and trained manpower along with other necessary infrastructure such as schools, police, hospitals etc., as China has accomplished. Creating these "centers of activity and further connecting them to each village would allow a conduit for farmers to transport and have their agriculture products processed, and thus add value to the primary commodity and become an active player in building value-added secondary agriculture. This reality, faced with declining agriculture productivity, is further widening the gap between the rural and urban population as was evident from the recent GDP report. The Technical Advisory Committee for Secondary Agriculture (TACSA) analyzed various other constraints, technical and regulatory as well as financial, along with various opportunities that this sector is presenting, and made a number of recommendations to jump-start this much-needed sector of the ndian economy. This report addresses three key issues: 1. Farm structure to aIIow increased inputs for gain in productivity. 2. Integrated technoIogies for deveIoping secondary agricuIture 3. FinanciaI vehicIe(s) to jump-start the agro-based industries t is well demonstrated that secondary agriculture can add two to three fold value to the primary agriculture and thus can invigorate not only the rural economy but also urban economy as the capacity of rural people to absorb goods and services increases. A failure to act upon this opportunity, i.e., to build secondary agriculture ndustries may have major social and political consequences as farmers have no other option available to them at this time. Similar to other areas, such as telecommunication, T, Parma etc., many of the needed technologies might have to be imported and adapted according to the needs of the industries, in addition to restructuring our R&D institutes to focus on the needs of the agriculture-based industries. Agriculture cannot be left to the farmer struggling with limited resources, as it is an industry that needs to compete in the open economy. Hence, all necessary help needs to be accorded to the farmer, from technology to financing to eventual marketing of the farm produce. The fact that farm size itself has dwindled to below a level that can provide subsistence to a farmer, is a matter of serious concern. This slimitation can be partly overcome by consolidating farms to a size that allows necessary inputs to increase productivity. A mechanism is suggested here to address this important issue, where the farm boundaries can be maintained by remote sensing technologies, but abolished physically to achieve economy of scale. Finally, while outlining various opportunities that exist in different areas, a mechanism is provided by which the Government can act as Venture Fund to build Secondary Agriculture xvthis sector on a business model, since many current subsidy schemes are not proving effective in the agriculture sector and the productivity continues to decline. To build world-class agro industries, many of the needed technologies might have to be imported and adapted according to the ndian environment. For this a new and unique institutional structure is proposed: to build an ntegrated Bioprocessing Technology nstitute (BT). Such an institute would work closely with bioprocessing industries and address all issues of new product development from farm input to marketing. Finally, suggestions are made to completely deregulate theagriculture industry except with regard to food safety;Thisis essential to provide necessary technological and financial inputs. The farmer should be completely free to grow, process, transport and sell any farm produce anywhere in the country, to take full advantage of and become participatory in the open economy of the country. While more work may be needed to build detailed plans, this report provides a foundation for building secondary agriculture industries across the country in a clustered manner to empower farmers to receive maximum value for their commodities. Without such an effort the poverty level will continue to increase in the villages and the gap between the rural and urban population will further widen. The migration from rural to urban centers in search of employment, which is expected to increase significantly will create more slums in cities, as there are not enough jobs available in urban areas to absorb this influx of rural population projected in the Planning Commission repot "Vision 2020. Following a presentation in January 2006, aTechnical Advisory Committee on Secondary Agriculture (TACSA) was constituted by the Planning Commission as per the DO No. M-12043/3/2006-Agri/DCH/11/06/2985 dated 9.2.2006 (Order received on May 2007). TACSA addressed various constraints, opportunities and potential for building world-class secondary agriculture industries in ndia and examined 5Ws (What, Why, Who, When and Where) as well as making attempts at "How with a few examples. TACSA consisted of knowledgeable industrialists/scientists from ndia and NRs from USA and Canada, alongwith key consultants, chaired by Prof. Verma, an internationally recognized plant biotechnologist who understands the ndian farmer's condition and has the knowledge of the cutting-edge technologies that can transform the ndian agriculture. The objective of the committee was to study thoroughly the current state of activities in secondary agriculture in ndia and to compare it with the developed countries to bring about the transfer of needed technologies, possible collaborations and facilitating setup of new industries, with the funding from government and private sectors, in each of the key areas. n addition, TACSA identified several key infrastructural needs for growth of the secondary agriculture industry in the country, and suggested a few solutions, including changes in the current government regulatory structure to facilitate rapid growth in this sector. t is believed that success in this undertaking would have a wide impact on the rural as well as urban economies and will help bridge the gap between these two communities that is otherwise widening. No doubt, this undertaking will be expensive, but the cost of not doing may prove higher than doing it at this stage, for which there is no alternative solution in sight. TACSA: 1. thoroughly analyzed each sector that secondary agriculture is most likely to affect; 2. identified the current level of activities in each of these sectors in ndia; 3. evaluated the quality and value of many secondary agriculture products currently made in each sector in comparison with the international demands; 4. evaluated current technologies being used by ndian industries; 5. suggested some technology solutions available to improve current industries and help set up new world-class industries in each sector; 6. identified potential financial solutions and the willingness of key states to foster such development by implementing one or two model industries in each area; 7. identified impediments to launching a given industry in particular area in ndia. 8. evaluated the cost of solving the problem in each sector and the cost of not doing so 9. evaluated the impact of few such industries on ndian economy in the next 10-15 years. 10. estimated the level of activity (jobs) created by such industries. Secondary Agriculture xvi11. evaluated the impact of the secondary agriculture revolution on rural economic development. 12. suggested a vehicle to implement proposed changes both at the government level and at the rural level where such industries must be located. t was a privilege and an honor to serve the country in this capacity, and to work with a highly dedicated and passionate team of people who believe in this issue. t gives me a great pleasure to respectfully submit this report to Honorable Dr. M. S. Ahluwalia on behalf of TACSA for their consideration of various points suggested in this reports. Prof. D. P. S. Verma, FRSC Chairman, TACSA Secondary Agriculture xvii ACKNOWLEDGMENTS t has been my privilege and great honor to serve as Chairman of the Technical Advisory Committee on Secondary Agriculture (TACSA) that was organized on the request ofthe Planning Commission of ndia. would like to sincerely thank Honorable Dr. M. S. Ahluwalia (Deputy Chairman) and Dr. V. L Chopra (Member of the Planning Commission) who believe in this issue and are keen to find a workable solution to this complex problem facing the nation. My thanks go to other members of the Planning Commission who attended various meetings of the Committee and made some suggestions. n particular the Committee is thankful for inputs received from representatives of various States during their visits to Punjab, UP, Kerala, Maharashtra, Uttrakhand and Orissa. n addition, many presentations made by different people/organizations during the Farmers nterface, ndustry-Scientists nterface and the National Workshop on Jatropha and the presentations made at the Planning Commission are highly appreciated. n particular the discussions held with Dr. Mangala Rai, Secretary and Director General CAR; Dr. P. K. Mishra, Secretary of Agriculture, Dr. M. K. Bhan, Secretary DBT and Dr. Brahmachari, Secretary and Director General CSR, are highly appreciated. Special thanks are to Dr. Patil, Director AR, for organizing the ndustry-Scientist interface and Jatropha Workshop and Dr Yadav, VC of SVB Patel University, Meerut, to organize Farmers nterface, respectively, at their institutes. My sincere thanks go to all regular and co-opted members of the Committee for their careful work and valuable inputs. The Committee is very thankful to Dr. Vandana Dwivedi and other members of the staff for their continuous efforts in arranging various meetings, escorting the TACSA members to various States, and helping with preparation of this report. would like to express my appreciation to Mr. Sumit Sharma and Mr. N. Uttam Singh for their assistance during the course of this report and Dr. Jayanta Chattejee from my laboratory for various discussions and help in formatting the draft of this report as well as Ms. Diane Furtney for proof reading. The assistance provided by Dr. Rajan Thampi and his team in building the secondaryagriculture.org platform is highly appreciated. Finally, would like to thank the administration of The Ohio State University and my family for allowing me to spend time in preparation of this report. Secondary Agriculture 1 1 EXECUTIVE SUMMARY Agriculture is the foundation of ndian economy on which almost 70% of the population depends. Having achieved near self sufficiency in primary agriculture (grains, sugarcane, fruits, vegetable and milk, etc.), the country must now focus attention on "secondary agriculture and add value to the basic agro-commodities to allow farmers to get better returns from their harvest, create new jobs in the rural sector to grow rural economy which is entirely based on agriculture. The share of agriculture in the national GDP is continuously declined in the last 10 years (from 31% to 18.34% at present) while the number of people depending on it remains the same. Secondary agriculture can reverse this trend and add two to three-fold value to primary agriculture. Examples of secondary agriculture include vitamins from grains, oil from rice bran, starched sugar from corn, milk and protein from soybean, industrial chemicals and biofuel from sugarcane and ligno-cellulosic biomass, fiber boards from rice straw, high-value animal byproducts, in addition to the well-known medicinal plants and herbal products not yet fully capitalized in ndia. At present, the value added by the food processing industry is extremely low (about 8% of the total food production). Only 2.2% of horticulture products are processed, while more than 35% of fruits and vegetables are wasted due to lack of storage and processing facilities, and few secondary products (both food and non-food) are derived from plants or animals. Therefore, a significant opportunity exists for ndia if the primary agriculture could be transformed into secondary agriculture using appropriate technologies and building the needed rural infrastructure. Such a transformation would act as a catalyst to the entire GDP, as it would empower the farmer to take part in the open economy. Moreover, the rural population will become a better consumer for other products and services,as it is happening in China and other Asian countries. f agriculture is treated as an industry, then the question has to be asked: how to create value, deliver value and finally capture value: the basics of any business. Major constraints in building agro-industries in ndia include: Lack of coordination between the R&D institutes (CAR, CSR and DBT) and the agro-industries; Restricted flow of agricultural produce from one state to another; Poor market linkages for processed products for getting the price advantage; Lack of sufficient credit availability, administrative encouragement, policy support, etc.; Almost non-existent agri-venture capital in the country; Most important, the poor infrastructure -- essentially, the roads and transport systems to provide connectivity with urban markets, and the lack of power for cold storage systems and processing of perishable products. Secondary agriculture is highly complex, as it involves old as well as new technologies, capital investments, improvements in rural infrastructure, marketingand some critical changes in Government regulations.f successfully implemented, however, this activity can add hundreds of billionsof dollars to the ndian economy and create millions of new jobs within the next decade, making a fundamental change in rural life, which has so far not occurred in any significant way over the last 60 years. This "secondary agriculture revolution, is in fact what Gandhi ji wanted--"Gramine Udhyog Badhao. Secondary Agriculture 2ndia has a large number of institutes in CAR and CSR systems that should have long been successful in bringing about this transformation, but due to the lack of coordination and a fragmented approach without direct interaction with industries, no substantial progress has been made with the exception of a few developments. The simple fact that "Research is Business" is not fully understood and realized, although some efforts are being made by CSR to generate industrial links,while the same needs to be followed by CAR and DBT institutes. All R&D activities at the national institutes must be driven by the needs of the industries, and the commodity-based CAR institutes, such as Potato, Sugar Cane, Rice, Jute research nstitute etc. need to consider, in addition to crop productivity, value-addition to each commodity as their primary objective in direct collaboration with the industries. Such value addition includes: improving farm productivity by novel inputs and developing new agro-based products. For example, a close co-operation between the four major institutes with primary focus on medicinal plants along with the Medicinal Plants Board should allow rescue of over two dozen endangered medicinal plants species and provide genomic and chemical fingerprints to validate plant materials for export. This will directly stimulate export of medicinal plants of which ndia deserves a better share than it currently has in this $70 billion/year global industry. Agro-commodity-based high-end processing industries in ndia are at an embryonic stage of development. t is capital intensive and highly competitive. The market capitalization of the key global players runs into several Billion (B) dollars each (ConAgra $12B, ADM $29B, General Mills/Pillsbury $19B, Nestle/Purina $177B, Corn Products nternational $3B). Hence, the entry barriers to this industry are extremely high and help from the Government is needed. The industry normally operates on four basic business principles: value creation, value protection, value sharing and value recovery. t is important to keep in mind that even in developed countries where value addition is the norm, the spread between what the producers get and what the consumer pays goes down percent wise. The processor benefits, the retailers, wholesalers and consumers benefit as well as the middleman, but the producer gets the least benefit. We need to make sure that the same does not happen in ndia. ndian self-sufficiency in agriculture may be short lived ndia needs to approach the next twenty years differently from the way it has approached the past. As ndian economy improves, there will be greater demand for not only the basic foods but also processed and more nutritious foods adding value. Retail and infrastructure chain establishments demand fresh and high quality food without microbial and chemical contaminants and toxicants and agro-based non-food products. At the same time the country will have to increase competitiveness in global trade providing consistently high quality products and at a scale that will ensure meeting customers' demands. The notion that the country should give up on increasing agriculture productivity is not right this could be picked up by the private sector in profitable crops and the Government can focus on poor peoples' crops and orphan crops while helping to build secondary agriculture industries. The lack of incentives for the organized sector to participate; lack of infrastructure to grade, store,process and transport fruits and vegetable during the peak production season; and lack of organization of farming communities to go beyond selling their primary product are among some of the key reasons, aside from the availability of funds, why secondary agriculture is not developing in ndia as rapidly as it is needed. The Technical Advisory Committee on Secondary Agriculture (TACSA) was constituted by the Planning Commission to address these issues and find workable solutions that can serve as catalysts to fuel private sector activities in this important area. Such a stimulus may help transform the ndian agriculture economy from the grass roots level, so that it can keep up at least with the average growth of the GDP. TACSA consisted of a team of national and international experts in different sectors of agriculture technologies under the Chairmanship of Prof. Verma from The Ohio State University, USA. Having roots in a village in UP and able to reach to heights of leading agriculture biotechnologists in the World, Prof. Verma is familiar with the dynamics of technologies and the reality of agriculture in ndia. TACSA or a sub-set of it had extensive direct and indirect interactions during the last one-year (2008) with over 500 people, ranging from farmers to industrialists and scientists in ndia and abroad. Some TACSA members visited several States (Kerala, Maharashtra, Orissa-including a tribal area, Punjab, UP and Uttrakhand); hosted 3 one-day meetings with farmers, industrialists and scientists, as well as arranged a workshop on Jatropha to evaluate the potential of this crop for biofuel. This was followed by three extensive meetings (3 to 4 Secondary Agriculture 3days each) at the Planning Commission to discuss various issues and to have further direct inputs from various Ministries and organizations (Agriculture, CAR, DBT, Food Processing, Fisheries, Medicinal Plants Board), Meat Processors and SRO for crop mapping data. This report, consisting of 200 pages of direct comments on various issues supported by more than 100 pages of Appendix material and another 500 pages of data located on an interactive Web platform (www.secondaryagriculture.org), provides a glimpse of this complex issue which may need further evaluation of each sector in context with existing industrial activities in primary and secondary processing. This secured and interactive database needs to be further expanded to cover all sub-sectors and industries associated with agriculture to make it more comprehensive for providing a complete road map to judicially build world-class secondary agriculture industries in ndia. Analysisof this extensive task suggests that the potential for ndia in this area is enormous as it involves a wide sector of the agro-based economy. The range of products that can be, and should be, derived from primary agriculture is indeed very large. This includes by-products from grains, sugarcane, fruits, coconuts, medicinal plants, animals, and marine and other bioresource. Some activities do exist in these areas, but the level of these activities is very limited (less than $2 Billion/year). Most of the technologies in use are primitive, and are focused on commodity products. Moreover, the scale of the operation is too small to make it difficult to compete with other Asian countries, let alone the West. This report focuses on three aspects: 1. Farm structure and the inputs in primary agricuIture, which is Iimiting productivity. 2. TechnoIogicaI, institutionaI and other infrastructuraI issues hampering buiIding of worId-cIass agro industries. 3. FinanciaI vehicIes abIe to drive such agro-based ruraI industries. Primary and secondary agriculture are interlinked. To increase the inputs for bioprocessing, a consolidated farm structure, Federated Farmers Farms (3F) system is proposed.t willallow the necessary inputs for enhancing primary agriculture to feed the secondary agro-bioprocessing industries, located in close proximity to such consolidated farms. This system can start from contract farming in AEZs and eventually evolve into an integrated industry. For that, technologies available with SRO can help to retain the original land boundaries on paper and electronically while abolishing them in practice, an act that will create more land and allow appropriate inputs for large- scale propagation and processing. The farmer will not only receive money for his/her land lease to 3F, but would be able to work on such farms and share a portion of the equity in the 3F Corporations. This model is based on several successful co-operative ventures both in ndia and abroad. This is the only way farm productivity can increase so that bulk processing can take place, as it will meet the necessary input requirements of the industry. ndia has sufficient expertise in building successful cooperatives and can formulate a win-win policy for such organizations, taking into consideration both the farmer's and the investor's interests in such ventures. The farmer must retain the ownership of the land at all times. The details for implementing such a system need to be worked out by each state under a well-defined Central scheme. ndian legal structures are not yet conducive for this new paradigm shift in consolidated farming, however. t needs a major overhauling in the legal framework dealing not only with land but also markets, including the Agriculture Produce Marketing Committee (APMC) Act, Essential Commodities Act, and various taxes and restrictions on processing and retailing. Unless these bottlenecks are eliminated, major private sector investments in agri-businesswill remain difficult to attract and sustain. Consequently, the growth in high-value agriculture will remain a hostage to high risks associated with any new undertaking. Extensive efforts are underway in Europe and North America to convert current chemical industrial processes to bio-based ones demanding more agro-inputs. This global transformation of agriculture is likely to open new opportunities for ndia to compete in these emerging areas, provided appropriate technologies and investments are available to build this sector. Agro-processing, byproduct utilization and biofuel production were identified as mutual areas of interest in the US/ndia Knowledge nitiative proposal. This undertaking may be expensive, but the cost of not doing may prove to be much higher than doing it at this stage, for which there is no alternative in sight. Without such a bold step the gap between the rural and urban ndia will continue to grow, only to find more migration Secondary Agriculture 4from villages to cities resulting in further buildup of slum-dweller populations in cities. Considering the value that Secondary Agriculture can add (two to three-fold) to many sectors of primary agriculture, including crops, animal husbandry, fisheries and poultry area, any investment in this sector is fully justified. t is likely to have a major and sustainable impact on rural (Farmers) income throughout the country. Significant discussion ensued with regard to the mode of operation that can be effective in yielding the results of any new initiative. t was concluded that any new inputs by the Government must be made, as an investment rather than pouring additional monies in to existing structures that are proving ineffective. t is suggested that the name of the Ministry of Food Processing be changed to the "Ministry of Bio-Processing to include both food and non-food agro-based industries. Under this umbrella, an autonomous "Special Purpose Vehicle (Secondary Agriculture nnovation Fund Ltd, SAF) with the sole purpose of building innovative Bio-processing Ventures be created. SAF would operate as a business managed by professional venture fund managers and technologists to deliver the desired results. DBT may be able to provide technical support in the appraisal of such proposals. Stimulating the development of secondary agriculture in ndia would require smart capitaI. People with talent for investments and experience in deploying innovative technologies and business models and ability to access technologies and markets globally will play a major role in the rapid development of this industry. SAF needs to be established with a minimum investment of $2 BiIIion during the 11thFive Year Plan. This investment is expected to be matched by other national and international venture funds in a ratio of 1:1, which would be invested in a further 1:1 equity partnership, making it an effective investment of $6-8 BiIIion. While 90% of this fund will be invested in various new bioprocessing ventures, a fraction of this investment will be made to establish an ntegrated Bioprocessing Technology nstitute (BT). This institute would have pilot plant facilities and modern processing equipment for providing state-of-the-art training as well as testing (certification), packaging and marketing functions. BT will also solicit appropriate national and international technologies and adapt them for the needs of the ndustry in collaboration with existing CAR, DBT and CSR institutes. TACSA is proposing that a sum of $2 biIIion be invested by the Government to jump-startthe secondary agricuIture activities as foIIows: This investment, Secondary Agriculture mprovement Fund (SAF), is to be treated as venture capitaI with expected returns in a defined time; An investment of $200 Million in developing the bioprocessing infrastructure, including building an integrated Bioprocessing Technology institute (BT); An investment of $100 Million coupled with additional private Angel Funds of $100 Million for early stage concept development and proof of concept generation in specific promising bio-processing technologies; An investment of $700 Million to be coupled with private venture funds for small company development (minimum of 1:1 matching and up to 1:4 matching of SAF:Private Funds). An investment of $1 Billion for project financing to be coupled with private funds of $2-3 Billion. The cumuIative impact of this initiative is IikeIy to totaI $6-8 BiIIion. The premise behind these investments is that a number of industries are now being established that are leveraging the biomass, agricultural residues as well as processing food, grains, fruits and vegetables, feed etc. to create higher value, longer shelf life and globally marketable products. BT with assistance from an international team of about 100 scientists/engineers/agro-marketing experts (NESA) working closely with CAR and CSR institutes, can provide the necessary expertise for ndia to build quality secondary agriculture products to be marketed globally. This institute can also conduct R&D in new frontier areas of technology and help translate scientific research into specific product applications. This institute shall directly work in collaboration with private companies with an independent organizational structure driven by basic business principles. IBTI shouId not be an academic institution granting degrees similar to other national institutes. Rather, it should provide specific training to graduates coming out of other institutes with focus on product development. This will act as a bridge between the academic institutions and industries, a step that is currently missing in ndian agriculture education system. TACSA believes that all commodity-based CAR institutes, such as Potato, Sugarcane, Rice Secondary Agriculture 5Research etc.,should be reorganized focus on value addition to each crop. To strengthen the position of ndia in the Medicinal plants area, all major medicinal plants research institutes (CMAP, TBGR, HBT and NRC-MAP) should be brought under one super-structure to coordinate their efforts in propagation, processing, QC and new products development,with a mission to doubIe the export of medicinaI pIants from India within the next five years. This can be achieved if genetic and chemical fingerprint certification is provided to growers and processors and appropriate packaging and marketing steps are taken as suggested in this report. Finally, most of the ndian bio-processing industries as well as training institutes are using outdated and inefficient equipment, while warehouses of fully functional advanced used equipment are avaiIabIe in Europe and USA. Again, China is taking advantage of such equipment and procuring it at a fraction (15-20%) of the original cost. To reduce the cost of major new equipments for bioprocessing and packaging plants, it is strongly recommended that all new and used farm and processing equipments, as weII as agro-products testing/research equipments shouId be fuIIy exempted from import duty and taxes. The apparent loss of custom duty on such imports will be more than offset by the low cost of imports and building the new industries which will generate better-paying jobs and taxable revenues within 5 years, thereby invigorating the entire agricuIture sector. Only through an integrated approach can one see the fruits from an investment in this area. The recommendations provided in this report, if implemented, would bring about a major change in the agriculture economy of the country and eventually improve rural life, spurred by the secondary agriculture industries, within a short period of time. Growth in this sector is likely to fuel the entire economy, as the capacity of ruraI popuIation wiII increase to absorb goods and services developed by the industrial sectors in the country. Progress in this area is vital for the development of the nation at large. ndia may follow examples from reland, China, New Zealand and Brazil, the newly emerging agro-bioresource-based economies. TACSA believes that ndia can accomplish this mission with cooperation from different parties and coordination at the center to bring about second green revoIution based on secondary agricuIture. Secondary Agriculture 6 2 RECOMMENDATIONS Having achieved near self-sufficiency in primary agriculture (food grain, vegetables, fruits and milk production), ndia must focus during the 11th 5-year plan on Secondary Agriculture, which will allow addition of value to the farm produce and improve the rural economy. The fact remains that agriculture is the only major sector, which has not had new technological inputs after the import of germplasm (wheat, rice and soybean),which led to the "so called Green Revolution.Meanwhile telecommunication, T, Biotechnology and other industries (such as automobile) have had opportunities to import new technologies and are slowly changing to the international norms to make them globally competitive. t is time that agriculture processing follow the same path and begin to build international-level companies for which new technologies and equipment are urgently needed and which may be imported, including the used equipment. ndia should not hesitate to do so to make this sector more competitive. This single step alone will make a visible change within five years. n this endeavor the role of national institutes is paramount. The focus of CAR institutes needs to be changed to include crop processing and value addition. There is an urgent need for all institutes to become responsive to the needs of the industry. The recent initiative of CSR in this direction is encouraging but CAR/DBT should follow the same path and establish linkages with the industry. Such interactions should be transparent and accountable, with specific goals. The institutions should take the initiative to kick-start new industries. t is surprising to note that no technology developed by any national institutes has given birth to any new industry in ndia in last 50 years. The 200 or so institutes that now exist should be able to create miracles with proper motivation to scientists and with clearly defined goals. A major structural change is needed to bring about full utilization of scientific resource available at ndian institutes. The research needs to be translated into business outcome. To meet the requirements of trained manpower, there is an urgent need to adjust the curricula of all agriculture universities in ndia to focus on bioprocessing education with practical training, including marketing of agro-products. The role of agriculture extension services must be increased, including broadcasting of information and remote access for improved farm practices, agro-inputs, processing and packaging, as well as market data at the rural level, using web-based technologies. Only through a close co-operation between the Government, ndustry and nstitutions can one revitalize agriculture activities in ndia, including bioprocessing which can add two to three fold value to this sector. n this endeavor, the role of the Government should be of a facilitator, rather than controller with minimum bureaucratic hurdles. Secondary Agriculture crosses activities in a number of Government Ministries, and hence the Planning Commission may have to take a different approach to this endeavor. The following recommendations are made by TACSA to address various issues affecting Secondary Agriculture ndustries development in the country: A. OrganizationaI Considerations: 1. At present, secondary agricuIture-reIated activities are spread across severaI Government Ministries. It is recommended that a CentraI Office of Secondary AgricuIture (COSA) be Secondary Agriculture 7estabIished at the PIanning Commission to co-ordinate with various ministries. If this not possibIe, than a department of Secondary AgricuIture TechnoIogies (DSAT) aIong the Iines of DBT may be created. 2. t is suggested that the name of the Ministry of Food Processing be changed to the "Ministry of Bio-Processing to include both food and non-food agro-based industries and this Ministry assume the primary role of coordinating activity with all States including creation of regional offices of secondary agriculture (ROSA)as well as assuming financial responsibility. 3. A team of international and national experts in each area of secondary agriculture (NESA) should be established to provide technical and marketing inputs to the Ministry of Bio-Processing and BT (see below). This team (about 8 persons in each area; for a total of 96) headed by a technically competent leading authority, should interface with COSA to ensure that all programs are implemented in a time-bound manner with international standards and are utilizing the best available technologies for making cost-effective high-quality products. B. TechnicaI Considerations 4. Similar to other technologies, most of which had to be imported tondia, the much-needed bioprocessing technologies must be brought in from international institutions/industries. n an open economy where agriculture is being considered as an industry, the best technologies and equipment should be applied to become competitive in this area. 5. For seeking and transferring reIevant technoIogies, and providing training in aII aspects of agro-businesses vaIue chain -- incIuding marketing and opening new export opportunities for the Indian bioproducts -- a new Integrated Bioprocessing TechnoIogy Institute (IBTI) needs to be estabIished. IBTI can tap the resources of INSA and work cIoseIy with industries. C. FinanciaI Considerations 6. A minimum of $2 BiIIion investment (Secondary AgricuIture Innovations Fund, SAIF) by the Government wouId be necessary to faciIitate buiIding Secondary AgricuIture Industries across the country during the 11th5-year pIan. This fund shouId be managed by an autonomous speciaI purpose vehicIe (Secondary AgricuIture Innovations Fund, Ltd.) with the soIe purpose of buiIding innovative Bio-processing Ventures, each operating as a business, under the umbreIIa of the Ministry of Bio-Processing. 7. This investment (SAF) is expected to be matched by other national and international venture funds in 1:1 ratio, which would be invested further in 1:1 equity partnership with new industries, making it an effective $6-8 Billion investment for various small, medium and large bioprocessing ventures. 8. To demonstrate the full potential of any agro-commodity, examples of high value-addition ndustries needs to be set up in each sector. The cost of such setups must be borne 50% by the Central Government, 10% by the State and 40% by the new entrepreneur. Such units need to be World-class and internationally competitive, with a single Government interface provided by SAF. D. InstitutionaI Organization 9. The agricuIture curricuIa at ICAR institutes and agricuIture coIIeges need to be revised to incIude secondary agricuIture, bioprocessing technoIogies and agricuIture marketing courses emphasizing practicaI demonstrations. TACSA recommends setting up a Task Force for AgricuIture Education Reform to impIement this change as soon as possibIe. 10. All commodity-based CAR institutes, such as Potato Research, Sugar Cane, Rice Research etc., must focus, in addition to crop productivity, on value addition to each commodity, in direct collaboration with BT and the relevant industries. Many of the needed Secondary Agriculture 8technologies and equipment have to be imported, which should be given high priority. 11. The entire CAR system needs to become more project-oriented and Extension activities focused on increased crop productivity, which is essential to provide the raw material for secondary agriculture agro-industries. This would require innovations in soil micronutrients, crop management, drip-irrigation (water management), as well as input of biofertilizers and biocides for sustainable agricultural productivity. 12. The NationaI HorticuIture and MedicinaI PIants Mission has a great potentiaI. However, packaging and quaIity controI standards need to be estabIished, incIuding testing and certification for chemicaI and genotypic fingerprintsperformed by with adequate regionaI faciIities at the district IeveIs. A MedicinaI and Aromatic PIants Certification Office (MAPCO) may be estabIished to accompIish this goaI. 13. Before encouraging the export of any agro-commodity, it needs to be assessed whether such a product can be further processed within the country for higher value addition. A central database for such available technologies and facilities needs to be established and integrated with commodities on the www.secondaryagriculture.org site. The Ministry of Bioprocessing and Agriculture in consultation with CAR and CSR institutes need to develop detailed reports on each agro-commodity addressing the following major points: a. MethodoIogy & Product Definitions Reliability and Reporting Limitations Data nterpretation Product Definition and Scope of Study b. Executive summary Market Overview Trends & ssues Product ntroduction Focus on Select Players Global Market Perspective c. Markets North America Europe Asia-Pacific Africa ndia d. Advantage of India in the Export of this Agro-Product 14. The Agriculture Extension Service needs to be revitalized using web-based technologies at the rural level "linking the farmers with the markets to inform them about necessary agro- practices, soil inputs, pest management, packaging and processing. The e-Chaupal model can be useful for this activity. 15. The open universities system at Nashik and Delhi may be used for broadcasting Secondary Agriculture-related extension services as well as imparting remote training across the country in the area of primary agriculture improvement and secondary agriculture processing of all major crops. E. Farm LeveI Organization: 16. The current farming system in ndia has become unsustainable and agricultural productivity is not increasing. A consolidated farming, Federated Farmers Farms (3F) system, may be established. This "3F system will increase primary agriculture productivity and will allow necessary inputs to help spur the secondary agriculture in rural areas. This activity can begin in AEZs that are already focusing on specific agro-commodities and where proposed Mega Food Parks should be located. 17. Alternative crops need to be developed including medicinal plants and biofuel crops. Biofuels production may be focused on lignocellulosic digestion technologies as those can be used for both bagasse hydrolysis as well as other lignocellulosic biomass utilization. TACSA believes that cautionshould be exercised for promoting Jatropha for biofuel until it is proven to be safe (toxin-free) and shown to be an economically viable crop. No grain-based alcohol production for biofuel should be encouraged. 18. As the demand for meat is increasing, the control and regulation of animal slaughterhousesshould be brought Secondary Agriculture 9under one central organization and removed from municipality's control. This would not only create more hygienic conditions and meet the growing demand of this needed commodity;such organized industries would also be able to process all valuable byproducts derived from animal waste to prevent environmental damage. The animal byproducts area is an untapped bioresource for ndia for which thousands of industries can be developed. E. Infrastructure for Bioprocessing: 19. Besides roads and power, the need for cold storage is vital for uplifting the entire bioprocessing sector, including vegetable, fruits and meat. These cold chains need to be developed by the private sector, with significant subsidies by the Government (40% for construction and 20% on electricity cost). Such cold storage systems must also be more energy efficient as compared to the current systems and should operate year around. 20. To reduce the cost of major equipment/processing and packaging pIants, it is recommended that aII farm and processing equipment, agro-products testing/research equipments as weII as packaging materiaIs shouId be fuIIy exempted from duty and taxes. The import of used equipment for agro-industries shouId be freeIy aIIowed with out any Iicense requirements. 21. Transport of all primary and secondary agriculture products across the country must be open and octroi tax-free, with perishable produce given the topmost priority for exit from such tollbooths. Export of perishable food and non-food items must be given shipping priority. The same should apply to imports of all perishable materials. The Custom Officers need to be specifically trained to handle such shipments. Any waste due to unnecessary delays in custom clearance is a national wastage and is completely unjustified. Building a set of bioprocessing industries in a demonstration phase would require establishing one Mega Food Park that can generate sufficient inputs for making valuable byproducts from fruits, vegetables or meat industries. Success in this endeavor can then be duplicated in other locations across the country. f this activity is coupled with BT and NESA, than success in this endeavor will be ensured as sufficiently trained manpower becomes available. While implementation of all these recommendations may take time and investment, two steps can be taken immediately without significant expense, and both will have a major impact. These are: aIIowing import of used processing/testing equipment and consoIidating activities of aII medicinaI pIants centers and institutes under one umbreIIa.A change in the curricula of all CAR institutions is urgently needed to meet the growing demand of the food-processing sector, and if this sector is fully developed secondary bioprocessing industries will evolve. Overall, these 21 recommendations, if followed, could change the face of rural ndia within 10 years time. Government needs to lead this effort as it is beyond the scope of any single or a group of industries. The scope of the problem is also beyond a single ministry, and that is the reason not much success has come from the Ministry of Food Processing, despite their efforts during the last 10 years, as acknowledged. Only the Planning Commission under the proposed structure may be able to bring about this much-needed change. f ndia can reach in to space under a mission mode, and become self-sufficient in food production, TACSA believes it is within the capacity of ndia to accomplish the goal of a Secondary Agriculture mission and change the face of the rural ndia by bridging the widening gap between the rural and urban economies. Secondary Agriculture 10 3 INTRODUCTION The prosperity of any nation depends upon its ability to not only be sufficient in food production but also be able to utilize this renewable resource for making new products and services to create new jobs and grow the agro-based economy. Thus, all developed nations have made a successful transition from their primary agriculture practices to high-value "secondary agriculture over the last 60-80 years, creating new jobs and building wealth. As a result, their economies have moved from agricultural base to manufacturing and high-tech industries. Agriculture in this process has become a strong biomanufacturing industry creating food, feed, pharma and biofiber for the World markets, and the number of people directly dependent on agriculture has drastically declined in USA (from 60% to less than 2%). The average farmer income in the USA has significantly increased (in 2007, $81,400/year), twice the per capita income. The total farm GDP is projected to be $92 Billion in 2008 (USDA Data). Using state-of the art technologies US gets the most value out of the agriculture, as does Europe. The average farmer income in ndia is less than $850/year. With ndia's economy growing by an average rate of 8% a year for several years, euphoria has set in the society that "the country has arrived. However, this is far from the truth, with the exception of that a small percentage of people. As pointed out by Dr. Swaminathan, while in the eyes of some people ndia is shining, at the same time millions do not have sufficient food and basic necessities to support their livelihoods. t is a fact that almost 20% of the people in ndia (almost 225 Million) live below the internationally defined poverty line and the gap between the rich and poor is rapidly widening. Under-nutrition and malnutrition are increasing in the rural population. Nutrition in turndirectly affects Q and the productivity of people. As population grows (more in rural than in urban areas) the agriculture-based rural economy is coming under greater pressure. The responsibility of food security has been entirely left on the farmer without adequate help from other sectors of the society. Due to inadequate infrastructure and institutional help, the hard-working ndian farmerone of the world's low-cost produceris unable to support him/her self, let alone compete globally. n this process, however, he is able to grow enough food to feed the nation. n an open economy, the food supply cannot be considered to be different than the supply of any other commodities such as clothes, automobiles, or cell phones, only the markets determine where one can buy any products and at what cost. So with the opening of the economy the agriculture sector should also be widely opened for production, processing, transport and marketing of any agro-products, nationally or internationally. Government needs to ensure that the lower end of the population is provided with Food Coupons to be exchanged for basic food at Government-subsidized shops. The shopkeeper should then cash such coupons at the Bank. This will avoid handling of actual merchandize by the Government and the entire process will become more efficient and transparent. Having achieved near "self sufficiency in primary agriculture (grains, sugarcane, fruits, cotton and milk), ndia must now focus her attention to secondary agriculture; i.e.,add value to the basic agro-commodities to allow small farmers to get better returns from their efforts, to create new jobs in the rural sector and grow the agro-economy. n Agriculture Summit 2006 organized by FCC, value addition to agriculture was repeatedly emphasized, and it was stated Secondary Agriculture 11that R&D should be re-focused on high value crop products. The policy on industrialization of agriculture in ndia needs to be looked at in the same way as the overall industrialization policy in the country. Constraints faced by the agro-industry -- such as supply and delivery chains, high wastage costs, poor capacity utilization, shortage of power and availability of trained workforce, antiquated labor laws, obsolete and inefficient processing equipment, and un-coordinated state and local regulations -- are the same as in the manufacturing industry or even worse. Among these, the unavailability or shortage of power is the key deterrent for locating such industries close to the primary producing region. To develop an efficient secondary agriculture industry in the country, one-window cIearance of aII reguIations which in turn deaIs with different departments and ministries, is absoIuteIy essentiaI for dealing with agro-based industries. Such offices need to be located in small towns within easy reach of the farmer. ndia has advantages in this sector due to cheap rural labor, a different of agro-climatic zones to produce multiple crops, but this advantage need to be capitalized by removing other constraints and making this industry flourish. Much of the food processing industry (>70%) is currently unorganized according to the Ministry of Food Processing. This is largely due to the fact that these are small operations, but at the same time the process of creating a registered company is very complex and expensive further discouraging small operators to remain unorganized. Such a system is not conducive for building new companies. The Ministry of Corporate Affairs needs to have a close look at this issue from a rural point of view and create regional offices in towns within the reach of a rural person. The situation is not better in towns and cities depriving the Government from untaxed revenues in this fast growing sector of food processing. ndia has the scientific resources available at various CSR and CAR institutes, but these resources are compartmentalized, kept away from the industries where this knowledge base needs to be applied. f provided with proper incentives and freedom to collaborate internationally and with local industries, ndian scientists can help build the necessary secondary agriculture industries in the country. A team of interdisciplinary scientists can easily build at least one industry per year, provided that for such accomplishment they are appropriately rewarded. The seniority-based system needs to be abolished. A merit-based system should be driving all R&D institutions, as it is done in North America. This institutional reform will invigorate the entire R&D sector and allow creation of new industries. CAR institutes may consider locating private sector R&D units on their premises as CSR has done in a couple of cases. n addition, they emphasized offshore acquisition of technologies/ intellectual properties developed in other countries. The ultimate economic growth requires migration of workers based on skills and opportunities in a given sector of the economy. While the urban population is more mobile, in this paradigm, the ability of the farmer to migrate out of the profession in which he/she is engaged is not easy, as they have no other skills. Ultimately, the small farmers will have to move into different labor markets and farms must be consolidated for increased efficiency. Unfortunately, based on the limited industrial growth, there is no variety of labor markets available for the farmers, a step that China has successfully implemented for the transformation of its rural economy (see below). 3.1 AgricuIture as the Foundation of Indian Economy After six decades of independence, ndia remains predominantly rural with agriculture as its basic resource for subsistence of almost two-third of the population. Until recently, 32% of its GDP depended on agriculture. However, in the last six years the share of agriculture in national GDP has declined to below 20% (in 2008, 18.34%), while the number of people depending on agriculture remains almost the same (about 70%). The trend of decreased share of agriculture GDP in overall GDP in itself is not bothersome. What is bothersome is the fact that ndia has been unable to achieve a higher rate of growth in agriculture opportunities to create and capture more value both on the production and processing side. This trend, if continued, will further deprive the rural population of participation in the economic growth of the country and further widen the gap between the rural and urban populations. This situation must be averted with utmost urgency by taking an objective and scientific approach to make this group of people self-supportive and productive, and to integrate them slowly into the growing economy of the country as other developing countries in Asia, such as China have done. Secondary Agriculture 12The facts are: (Source: Outlook, 4th July'2005) Almost 70% population i.e. over 750 million people in ndia are dependent directly or indirectly on agriculture for their livelihood. Farmers' income is rising at the rate of only about 1.5% and expenditures are increasing at the rate of more than 4-5% (higher in last year)). Considering the real value of farm commodities in $ terms, the farmer's income is in fact declining. There are about 600,000 villages in ndia badly in need of basic social infrastructure like all-weather roads, drinking water, regular electricity, primary health care and basic education. Without the improvement in the basic infrastructure, no real industrial growth can occur in rural areas. Nearly half of the farmers nationally are in debt trap. n the state of Andhra Pradesh 82% of farmers are under debt and largest number of suicide cases (4000) have occurred in that region. Total short-term credit requirement for ndian Agriculture is about US$ 23.5 Billion while the financial nstitutions are able to supply only 12-14% of this requirement. According to the Ministry of Food Processing, only about 2.2% of the food is processed, while up to 35% fruits and vegetables are spoiled. Without proper value addition the return on farm produce are minimal. Few secondary agriculture industries currently exist in ndia. Most of the agro industries are focused on food, and more than 70% of this sector remains unorganized. 3.2 Current Status of AgricuIture in India The problems of primary agriculture have been well documented in several reports of the Planning Commission. These include small landholdings, low level of input usage, poor or non-existent extension services (Singh and Vijayraghvan 1995; Prakash, 2001; Swaminathan, 2005), lack of irrigation on two-thirds of the agricultural, land and tardy flow of market information. These and several other constraints (see section 4) need to be addressed to make agriculture more productive and competitive. On prima-facie, ndia, from a nation dependent on food imports to feed its population in 1950's and 1960's, is today not only self-sufficient in food production, but also has some reserves. With diverse agro-climatic zones and arable land of 184 million hectares, ndia has become one of the major food producers in the world with a wide variety of crops, fruits, vegetables, flowers, livestock and seafood. t produces annually 90 million tons of milk (highest in the world); 150 million tons of fruits and vegetables (second largest); 485 million livestock (largest); 204 million tons of food grains (third largest); 6.3 million tons of fish (third largest); 489 million poultry and 45 billion eggs. Due to continued increasing population pressure, however, the real surplus in the food sector is limited except for seasonal and regional gluts of a few fruits and vegetables due to limited transportation and processing facilities. As the demand for new food and non-food agriculture products increases, the ndian food processing industry is becoming attractive for investors. Actual foreign direct investment (FD) inflow into this industry in 2005-07 was Rs. 333 crores (approximately US$ 80 million). This is a very small sum, however, compared to the needs of this industry. As this sector becomes more organized and the demand of processed food increases, growth in this area is expected to be significant during the next decade. This demand needs to be met by building state-of-the-art food processing industries as well as full utilization of all byproducts both for food and non-food usage. This is creating significant opportunities to build new bio-based industries in the country. For current data on agriculture productivity across the country, and the price of various commodities, see Agriculture Research data Book 2007 (http://www.iasri.res.in) and the web site developed by TACSA: www.secondaryagriculture.org. ndian National Agriculture Research System (NARS) is one of the largest in the world comprising 47 Central nstitutes, 5 National Bureaus, 12 Project Directorates, 32 National Research Centers and 91 All ndia Coordinated Research Projects, as well as 45 Agricultural Universities. Overall, there are almost 190 government and 100 private organizations currently involved in agriculture R&D in ndia and more are in planning stages. During the 10thFive-year plan 2 CAR institutes, one national bureau, 3 project directorate and 10 State Universities were created. The size of this enterprise is indeed very large, which has resulted in Secondary Agriculture 13achieving significant productivity gains. However, time has come to reorient this establishment for value-addition to primary agriculture to increase farmer's real income and help build the rural economy. A report on revamping and refocusing agriculture research was submitted by Dr. Swaminathan (2005) to the Planning Commission. n this report, several valuable suggestions were made and it was emphasized that there is a gap in value addition to agriculture; the need for professionalization of agriculture was outlined. The following points are relevant to facilitate the secondary agriculture activities: Autonomy of financial management for all institutions of CAR, including authority for delegating foreign deputation. Developing a Creativity ndex for scientists and rewarding them accordingly. Creation of a National Virtual University for Science in Agriculture. A project mode for its research programs, rather than institutional funding, with an integrated system of competitive grants. Sharp focus on well-defined output indicators. Building a digital gateway for national and international trade in farm commodities. As per TACSA this data should be linked with value addition to farm produce. Recruitment system of scientists should be decentralized, with full recruitment transparency. Creation of an agro-research and business networking division to bring together academia and industry with biotechnology-centered agribusiness policies. Full freedom to institutions for managing research and teaching, and a focus on extension with accountability in performance. 3.2a: The "Apparent Success" in AgricuIture The success in ndia's agricultural production has been brought about primarily by bringing additional land under cultivation, increasing irrigation facilities, using improved high yielding variety of seeds and plant protection, coupled with judicious use of fertilizers, pesticides and improved cropping practices. The "green revolution was, in essence, a direct result of improved variety of seeds with an almost 40-50 fold increase in fertilizer and irrigation. The sustainability of this "apparent success is in question, however, as crop productivity is not increasing while the input costs are rising. Furthermore, the need to import wheat and pulses as well as vegetable oil, and most value-added processed foods such as confectionaries and high-protein health foods (which ndia is currently importing under open license), the contribution of agriculture to GDP is rapidly declining. ndia imported worth $2.89 Billion of agriculture products in 2003 (UNDO). This, coupled with the recent surge in food prices, is placing undue inflationary pressure on the entire economy, particularly affecting the rural population. The use of fertilizer inputs, which allowed ndia to increase grain production, has gone from 0.3 million tons in 1960 to 15 million tons at the end of the last century. The productivity per unit land still remains low, however, from wheat, rice and all other crops, indicating a further room for improvement, if proper inputs (particularly micronutrients) are made available and if appropriate farming practices are adopted. These inputs must also include hybrid seeds, micronutrients and biopesticides/biofertilizers. Addition of more chemical fertilizers alone is not likely to improve further crop yields, particularly in already high-yielding areas such as Punjab and UP. mprovement the soil health is essential all over ndia, an area where farmers need institut